Dealer Outlook

Trade Only Dealer Outlook Blog

Actually locking up some of the big spending cuts being bantered about in Washington this week could go a long way to increasing consumer confidence and, therefore, their spending. That would be good for us. But, oh, the hurdles to get there!

I’m not talking politics here, just reality. Political rhetoric from all sides will distort everything anyway. But, let’s face it – Washington’s historical jabs at belt-tightening and reducing big government have never gone any where in the past. Fact is, the number of people receiving government benefits has done nothing but grow over the years as entitlements (and earmarks) have ballooned.

Here are some sobering facts. According to the Census Bureau, almost 50 percent of all Americans live in a household in which at least one person receives government benefits. In the early 1980s that figure was just 30 percent and included all individuals on Social Security, subsidized housing, food stamps, unemployment checks and the like. For example, some 41.3 million people were on food stamps as of June 2010, up 45 percent from June 2008. With unemployment high and federal jobless benefits available for up to 99 weeks, 9.7 million unemployed workers were receiving checks in late August 2010, double the 4.2 million in August 2008. The Congressional Budget Office says we can add on another 19 million by 2019 who will get federal aid to buy health insurance. And, of course, that doesn’t mention the elephants — Social Security, Medicaid, Medicare and debt interest, now accounting for 47 percent of the budget.

Meanwhile, as the number of recipients has grown, the number of households not paying taxes has grown, too. It’s now estimated 45 percent of all households paid no taxes in 2010, up from 39 percent just five years ago, according to the Tax Policy Center. About half fail to earn enough while the rest get so many credits and deductions they zero out.

Basically, the overwhelming majority of the budget is off the table, leaving but a tiny slice from which all the cuts, if any, will come. Yesterday, President Obama sent down a $3.73 trillion budget that actually adds to the deficits this year (to a record high of $1.65 trillion) and next, while offering cuts that will come in after his first term. It ignores the elephants, however.

What’s on the cutting table? Only the small “discretionary” budget. It includes everything from foreign aid to resource preservation. Many programs are earmarks. Lots of them do good things. So, stand by for an increase of groups marching through Congressional offices crying “cut spending, just not in my program!” We could be among them!

In the end, however, we should be demanding Congress and the administration make genuine cuts now and include some long-term entitlement spending reductions that will reduce our long-range fiscal crisis. If that happens as a result of this budget debate, it will constitute real progress, help all of us to feel more positive about the future, and result in the acceleration of the modest increase in consumer spending we’re already seeing in our winter boat shows and dealerships. Am I dreaming?